China should move to market-oriented exchange rate

Days ahead of the second US- China Strategic and Economic Dialogue, the United States has reiterated that China needs to move towards a market-oriented exchange rate.

"We have made it very clear that a more market-determined exchange rate by China will make an important contribution to more sustained and balanced global growth," said Treasury Department Senior Coordinator for China Affairs David Loevinger at a news briefing here on Wednesday.

"It's important to have the bilateral channel as well as the multilateral channel, and we are actively engaged in both. We remain confident that China's going to decide that it is in its interests," he said.

"If you look at what's happening with the Chinese economy, their recovery is strengthening, their trade is growing, prices are rising, they're increasingly worried about the rise of housing prices," Loevinger said, adding that a stronger and more flexible exchange rate would help them manage challenges they face in their own economy.

Loevinger said that the US has been very clear in its discussions that China's movement towards a more market- determined and stronger exchange rate is an important part of a range of policies that are going to promote balanced and sustained growth in the global economy.

"As (the Treasury) Secretary (Timothy) Geithner said in early April, when we announced that we were delaying the release of the report, we're in intensive discussions with the Chinese bilaterally in the run-up to the S&ED and multilaterally in the G-20. He said at the time that he believes it is in the US's interests to let these discussions play out," the treasury official said.

"We remain confident that they're going to determine that it's in their interests to move to a more market- determined exchange rate," he added.

Loevinger said that indigenous innovation is also a very important issue that has to be taken up with China.

"We've made that very clear to the Chinese. We understand and support their efforts to move up the value-added chain, to promote technological development, but we just want to make sure that they do it in a way that doesn't close markets, doesn't cut off access for US goods and services and doesn't discriminate against US companies operating in China," he said.

"I think we've made some progress so far. That's going to be an important part of our discussions on Monday and Tuesday. And I think this is an issue that we're going to continue to discuss for a while," he said.